CERTIFICATION OF ENROLLMENT

SUBSTITUTE HOUSE BILL 1460

Chapter 383, Laws of 2023

68TH LEGISLATURE

2023 REGULAR SESSION

DEPARTMENT OF NATURAL RESOURCES—TRUST LANDS—EXCHANGES

EFFECTIVE DATE: July 23, 2023

SUBSTITUTE HOUSE BILL 1460

AS AMENDED BY THE SENATE

ByHouse Capital Budget (originally sponsored by Representatives Hackney, Waters, Simmons, Kloba, Pollet, Davis, and Macri; by request of Department of Natural Resources)

AN ACT Relating to the department of natural resources trust land management; amending RCW 79.17.020, 79.17.210, 79.22.060, 43.30.385, 79.19.020, 79.19.030, 79.11.340, 79.22.140, and 79.19.050; reenacting and amending RCW 79.64.110; adding a new section to chapter 79.19 RCW; adding new sections to chapter 79.17 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

(2) The legislature further finds that some of these lands have high ecological values and public benefits and should be maintained in public ownership as a park, open space, nature preserve, or similar designation to benefit the people of Washington.

(3) The legislature further finds that the department of natural resources needs an effective program to transfer these lands out of trust status to the natural areas program, other public agencies, or federally recognized Indian tribes, and simultaneously acquire legislative funding to acquire productive replacement lands to improve the revenue-generating performance of the state lands and state forestlands it manages.

(4) The legislature further finds that the trust land transfer program should be established within the department of natural resources with adequate funds to cover the department's expenses for administering the program and completing trust land transfers.

(5) The legislature further finds that there exists an interest by the public and trust beneficiaries that the program be well-documented and transparent, that each potential transfer be examined by the department of natural resources to ensure it is in the best interests of the trust beneficiaries, that an external advisory committee place proposed transfers into a prioritized order using standardized criteria, that the board of natural resources approve submission of the list to the legislature, and that parcels be transferred in order of priority.

(2) Underperforming state land and state forestland is land that the department determines has limited potential to generate income in the reasonably foreseeable future due to physical, legal, access, or other constraints. The department may use the real property transfer authorities under this chapter and chapter 79.22 RCW, as appropriate, to complete transfers under the trust land transfer program.

(3) The department shall use legislative appropriations for approved trust land transfers to acquire replacement real property that will provide long-term, sustainable revenue to the trust beneficiaries or is otherwise desirable to be added to the affected trust and to pay for the department's administrative expenses to complete the transfer, including the cost of department staff time, appraisals, surveys, environmental reviews, and other similar costs of the program.

(4) Transfers funded by legislative appropriation must be at fair market value, including the value of land, timber, other valuable materials, and improvements owned by the state. The legislative appropriation must be deposited in the natural resources real property replacement account created in RCW 79.17.210 and the parkland trust revolving fund established in RCW 43.30.385, as appropriate.

(5) The department shall prioritize the acquisition of working farms and forests when acquiring replacement real property for state lands transferred under this program when it can be demonstrated that the trust fiduciary obligations can be better fulfilled with these lands. The department shall endeavor to acquire replacement real property as quickly as practicable.

(6) The department shall only submit real properties for trust land transfers to the board or legislature through the process created in section 3 of this act if at least 50 percent of all previous appropriations provided after the effective date of this section for purchase of replacement lands for the trust land transfer program have been utilized to purchase replacement trust lands. The list of properties submitted to the board or legislature for possible trust land transfers through the process created in section 3 of this act may not exceed $30,000,000 in total property value for each year the list is submitted.

(1) Any citizen, state and federal agencies, counties, cities, towns, federally recognized Indian tribes, nonprofit organizations, special purpose districts, public development authorities, and other political subdivisions of the state, may nominate a parcel of state land or state forestland for the trust land transfer program. The nomination must be made to the department on forms provided by the department and accompanied by the fee provided under RCW 79.02.250.

(2) The department shall perform an initial review to determine whether the transfer of a nominated parcel is in the best interest of the trust for which the land is held and whether a public agency, as defined in RCW 79.17.200, is willing to take ownership of the parcel and is capable of managing the land for the public benefit. The department may require prenomination review of parcels over 4,500 acres or parcels over an estimated appraised market value of $15,000,000, including the value of the land, valuable materials, and improvements, if any.

(3) If the department determines through its initial review that transfer would be in the best interest of the trust for which the land is held and a public agency is willing and able to take ownership and manage the land, the department shall consult with potentially affected federally recognized Indian tribes, consistent with the department's consultation policy to identify and address cultural resource issues.

(4) Following the department's initial review and tribal consultation, the department may submit parcels to an advisory committee that shall evaluate and prioritize nominated parcels according to criteria approved by the board, including social, ecological, economic, and other values. The advisory committee may include representatives of trust beneficiaries, public agencies, federally recognized Indian tribes, overburdened communities, and vulnerable populations as defined in chapter 70A.02 RCW, and other stakeholders as determined by the department.

(5) The department, with approval of the board, shall determine the final, prioritized list of trust land transfer parcels to submit to the legislature for funding. If a legislative appropriation includes the full fair market value for the trust land transfer parcel, and the board determines that the transfer is in the best interest of the trust for which the land is held, the department shall complete the transfer.

Sec. 4. RCW 79.17.020 and 2013 2nd sp.s. c 19 s 7035 are each amended to read as follows:

(1) The board of county commissioners of any county and/or the mayor and city council or city commission of any city or town and/or the board shall have authority to exchange, each with the other, or with the federal forest service, the federal government or any proper agency thereof and/or with any private landowner, county land of any character, land owned by municipalities of any character, and state forestland owned by the state under the jurisdiction of the department, for real property of equal value for the purpose of consolidating and blocking up the respective landholdings of any county, municipality, the federal government, or the state of Washington or for the purpose of obtaining lands having commercial recreational leasing potential. The board shall also have the authority to exchange state forestland for the purpose of obtaining land with greater natural resource or income-producing potential, when in the best interest of the state or affected trust. State forestland exchanged under this section may not be used to reduce the publicly owned forestland base.

(2)(((a) During the biennium ending June 30, 2013, for the purposes of maintaining working farm and forest landscapes or acquiring natural resource lands at risk of development, the department, with approval of the board of natural resources, may exchange any state land and any timber thereon for any land and proceeds of equal value, when it can be demonstrated that the trust fiduciary obligations can be better fulfilled after an exchange is completed. Proceeds may be in the form of cash or services in order to achieve the purposes established in this section. Any cash received as part of an exchange transaction shall be deposited in the forest development account to pay for administrative expenses incurred in carrying out an exchange transaction. These administrative expenses include road maintenance and abandonment expenses. The amount of proceeds received from the exchange partner may not exceed five percent of the total value of the exchange. The receipt of proceeds shall not change the character of the transaction from an exchange to a sale.

(3))) Prior to executing an exchange under this section, and in addition to the public notice requirements set forth in RCW 79.17.050, the department shall consult with legislative members, other state and federal agencies, local governments, federally recognized Indian tribes, local stakeholders, conservation groups, and any other interested parties to identify and address cultural resource issues, and the potential of the state lands proposed for exchange to be used for open space, park, school, or critical habitat purposes.

Sec. 5. RCW 79.17.210 and 2018 c 298 s 7005 are each amended to read as follows:

(1) The legislature finds that the department has a need to maintain the real property asset base it manages and needs an accounting mechanism to complete transactions without reducing the real property asset base.

(2) The natural resources real property replacement account is created in the state treasury. This account shall consist of funds, including the value of land, timber, other valuable materials, and improvements owned by the state, transferred or paid for the disposal or transfer of real property by the department under RCW 79.17.200 and the transfer of state lands or state forestlands into community forest trust lands under RCW 79.155.040. The funds in this account shall be used solely for the acquisition of replacement real property and may be spent only when, and as, authorized by legislative appropriation. ((During the 2013-2015 fiscal biennium, funds in the account may also be appropriated for the land purchase in section 3245, chapter 19, Laws of 2013 2nd sp. sess. under the provisions of section 3245, chapter 19, Laws of 2013 2nd sp. sess. and chapter 11, Laws of 2013 2nd sp. sess. During the 2017-2019 fiscal biennium, moneys in the account may also be appropriated for developing and constructing the pipeline in section 3061, chapter 298, Laws of 2018 under the provisions of section 7004, chapter 298, Laws of 2018.))

Sec. 6. RCW 79.22.060 and 2012 c 166 s 7 are each amended to read as follows:

(1) With the approval of the board, the department may directly transfer or dispose of state forestlands without public auction, if the ((lands))transfers are:

(a) ((Consist of ten contiguous acres or less;

(3)))In lieu of condemnation or to resolve trespass and property ownership disputes and the lands consist of 10 contiguous acres or less or have a value of $25,000 or less; or

(2) Real property to be transferred or disposed of under this section shall be transferred or disposed of only after appraisal and for at least fair market value, and only if the transaction is in the best interest of the state or affected trust. Valuable materials attached to lands ((transferred to public agencies under subsection (2)(c) of this section))to be transferred under subsection (1)(b) of this section must be appraised at the fair market value without consideration of management or regulatory encumbrances associated with wildlife species listed under the federal endangered species act, if any.

(((4)))(3)(a) Except as provided in (((b) of)) this subsection, the proceeds from real property transferred or disposed of under this section shall be deposited into the parkland trust revolving fund and be solely used to buy replacement ((land within the same county as the property transferred or disposed))forestland for the benefit of the county from which the property was transferred or disposed and pay for the department's administrative expenses to complete the transfer, including the cost of department staff time, appraisals, surveys, environmental reviews, and other similar costs of the transfer. The legislative authority of the county from which the real property was transferred or disposed under subsection (1)(b) of this section may request in writing that the department distribute a percentage of the proceeds associated with valuable materials. Upon such a request, and subject to prior approval by the board, the department shall distribute the requested percentage of proceeds associated with valuable materials as provided in RCW 79.64.110.

(b) The proceeds from real property transferred or disposed of under ((subsections (1)(c) and (2)(c) of)) this section for the purpose of participating in the state forestland pool created under RCW 79.22.140 must be deposited into the parkland trust revolving fund and used to buy replacement forestland for the benefit of that county, as provided in RCW 79.64.110 and located within any county participating in the land pool or under a county agreement as provided in RCW 79.22.140.

(c) Except as otherwise provided in this subsection, in counties with a population of ((twenty-five thousand))25,000 or less, the portion of the proceeds associated with valuable materials on state forestland transferred under ((subsections (1)(c) and (2)(c) of)) this section must be distributed as provided in RCW 79.64.110. If requested in writing by the legislative authority of a county participating in the state forestland pool created under RCW 79.22.140, the portion of the proceeds associated with valuable materials on state forestland transferred under ((subsections (1)(c) and (2)(c) of)) this section must be deposited in the parkland trust revolving fund and used to buy replacement forestland for the benefit of that county, as provided in RCW 79.64.110, and located within any county participating in the land pool or under a county agreement as provided in RCW 79.22.140.

Sec. 7. RCW 43.30.385 and 2014 c 32 s 2 are each amended to read as follows:

(1) The parkland trust revolving fund is to be utilized by the department for the purpose of acquiring real property, including all reasonable costs associated with these acquisitions, as a replacement for the property transferred to the state parks and recreation commission, as directed by the legislature in order to maintain the land base of the affected trusts or under RCW 79.22.060 and to receive voluntary contributions for the purpose of operating and maintaining public use and recreation facilities, including trails, managed by the department.

(2)(a) Proceeds from transfers of real property to the state parks and recreation commission or other proceeds identified from transfers of real property as directed by the legislature shall be deposited in the parkland trust revolving fund.

(b) ((Except as otherwise provided in this subsection, the))Subject to RCW 79.22.060(3), proceeds from real property transferred or disposed under RCW 79.22.060 must be used solely to purchase replacement forestland, that must be actively managed as a working forest, ((within the same county as the property))for the benefit of the county from which the property was transferred or disposed. ((If the real property was transferred under RCW 79.22.060 (1)(c) and (2)(c) from within a county participating in the state forestland pool created under RCW 79.22.140, replacement forestland may be located within any county participating in the land pool.))

(c) Disbursement from the parkland trust revolving fund to acquire replacement property and for operating and maintaining public use and recreation facilities shall be on the authorization of the department.

(d) The proceeds from the recreation access pass account created in RCW 79A.80.090 must be solely used for the purpose of operating and maintaining public use and recreation facilities, including trails, managed by the department.

(3) In order to maintain an effective expenditure and revenue control, the parkland trust revolving fund is subject in all respects to chapter 43.88 RCW, but no appropriation is required to permit expenditures and payment of obligations from the fund.

(4) The department is authorized to solicit and receive voluntary contributions for the purpose of operating and maintaining public use and recreation facilities, including trails, managed by the department. The department may seek voluntary contributions from individuals and organizations for this purpose. Voluntary contributions will be deposited into the parkland trust revolving fund and used solely for the purpose of public use and recreation facilities operations and maintenance. Voluntary contributions are not considered a fee for use of these facilities.

Sec. 8. RCW 79.64.110 and 2021 c 334 s 995 and 2021 c 145 s 3 are each reenacted and amended to read as follows:

(1) Any moneys derived from the lease of state forestlands or from the sale of valuable materials, oils, gases, coal, minerals, or fossils from those lands, except as provided in RCW 79.64.130, or the appraised value of these resources when transferred to a public agency under RCW 79.22.060, ((except as provided in RCW 79.22.060(4),)) must be distributed as follows:

(a) For state forestlands acquired through RCW 79.22.040 or by exchange or as replacement for lands acquired through RCW 79.22.040:

(i) The expense incurred by the state for administration, reforestation, and protection, not to exceed ((twenty-five))25 percent, which rate of percentage shall be determined by the board, must be returned to the forest development account created in RCW 79.64.100. During the 2017-2019, 2019-2021, and 2021-2023 fiscal biennia, the board may increase the ((twenty-five))25 percent limitation up to ((twenty-seven))27 percent.

(ii) Any balance remaining must be paid to the county in which the land is located or, ((for))if the land acquired under RCW 79.22.040 was exchanged, transferred, or disposed, payment must be made to the county from which the land was exchanged, transferred, or disposed. For counties participating in a land pool created under RCW 79.22.140, to each participating county proportionate to its contribution of asset value to the land pool as determined by the board. Payments made under this subsection are to be paid, distributed, and prorated((, except as otherwise provided in this section,)) to the various funds in the same manner as general taxes are paid and distributed during the year of payment. However, ((in order to test county flexibility in distributing state forestland revenue,)) a county may in its discretion pay, distribute, and prorate payments made under this subsection of moneys derived from state forestlands acquired by exchange ((between July 28, 2019, and June 30, 2020))or as replacement lands, for lands acquired through RCW 79.22.040, ((within the same county,)) in the same manner as general taxes are paid and distributed during the year of payment for the former state forestlands that were subject to the exchange.

(iii) Any balance remaining, paid to a county with a population of less than ((sixteen thousand))16,000, must first be applied to the reduction of any indebtedness existing in the current expense fund of the county during the year of payment.

(iv) With regard to moneys remaining under this subsection (1)(a), within seven working days of receipt of these moneys, the department shall certify to the state treasurer the amounts to be distributed to the counties. The state treasurer shall distribute funds to the counties four times per month, with no more than ((ten))10 days between each payment date.

(b) For state forestlands acquired through RCW 79.22.010 or by exchange or as replacement lands for lands acquired through RCW 79.22.010, except as provided in RCW 79.64.120:

(i) Fifty percent shall be placed in the forest development account.

(ii) Fifty percent shall be prorated and distributed to the state general fund, to be dedicated for the benefit of the public schools, to the county in which the land is located or, for counties participating in a land pool created under RCW 79.22.140, to each participating county proportionate to its contribution of asset value to the land pool as determined by the board, and according to the relative proportions of tax levies of all taxing districts in the county. The portion to be distributed to the state general fund shall be based on the regular school levy rate under RCW 84.52.065 (1) and (2) and the levy rate for any school district enrichment levies. With regard to the portion to be distributed to the counties, the department shall certify to the state treasurer the amounts to be distributed within seven working days of receipt of the money. The state treasurer shall distribute funds to the counties four times per month, with no more than ((ten))10 days between each payment date. The money distributed to the county must be paid, distributed, and prorated to the various other funds in the same manner as general taxes are paid and distributed during the year of payment.

(2) A school district may transfer amounts deposited in its debt service fund pursuant to this section into its capital projects fund as authorized in RCW 28A.320.330.

Sec. 9. RCW 79.19.020 and 2003 c 334 s 526 are each amended to read as follows:

The department, with the approval of the board, may purchase property at fair market value to be held in a land bank, which is hereby created within the department. Property so purchased shall be property which would be desirable for addition to the public lands of the state because of the potential for natural resource or income production of the property. ((The total acreage held in the land bank shall not exceed one thousand five hundred acres.))

Sec. 10. RCW 79.19.030 and 2004 c 199 s 215 are each amended to read as follows:

The department, with the approval of the board, may:

(1) Exchange property held in the land bank for any other lands of equal value administered by the department, including ((any))state lands ((held in trust.))and state forestlands;

(2) Exchange property held in the land bank for property of equal or greater value which is owned publicly or privately, and which has greater potential for natural resource or income production or which could be more efficiently managed by the department, however, no power of eminent domain is hereby granted to the department; ((and))

(3) ((Sell property held in the land bank in the manner provided by law for the sale of state lands))Except as provided in subsection (4) of this section, sell property that has been exchanged into and is held in the land bank as provided under RCW 79.11.340 without any requirement of platting and ((to)) use the proceeds to acquire property for the land bank which has greater potential for natural resource or income production or which would be more efficiently managed by the department; and

(4) If a department lessee owns and resides in a house located on land that has been exchanged into and is held in the land bank, sell the land directly to the lessee for the appraised fair market value of the land and use the proceeds of the sale as provided in subsection (3) of this section. If the lessee does not purchase the land for the appraised fair market value, the department shall sell the land as provided under subsection (3) of this section.

Sec. 11. RCW 79.11.340 and 2003 c 334 s 399 are each amended to read as follows:

(1) Except as provided in RCW 79.10.030(2), the department shall manage and control all lands acquired by the state by escheat, deed of sale, gift, devise, or under RCW 79.19.010 through 79.19.110, except such lands that are conveyed or devised to the state for a particular purpose.

(2) ((When))Except as provided in RCW 79.19.030(4), when the department determines to sell the lands, they ((shall))may initially be offered for sale either at public auction or direct ((sale))transfer to public agencies as provided in this chapter.

(3) ((If the lands are not sold at public auction, the))The department may, with approval of the board, market the lands through persons licensed under chapter 18.85 RCW or through other commercially feasible means at a price not lower than the land's appraised value.

(4) Necessary marketing costs may be paid from the sale proceeds. For the purpose of this subsection, necessary marketing costs include reasonable costs associated with advertising the property and paying commissions.

(5) Proceeds of the sale shall be deposited into the appropriate fund in the state treasury unless the grantor in any deed or the testator in case of a devise specifies that the proceeds of the sale be devoted to a particular purpose.

Sec. 12. RCW 79.22.140 and 2012 c 166 s 3 are each amended to read as follows:

(1) The board may create a state forestland pool, to be managed in accordance with this section, if the board determines that creation of a land pool is in the best interest of the state or affected trust, based on an analysis prepared by the department under RCW 79.22.150. ((The land pool may not contain more than ten thousand acres of state forestland at any one time.))

(2) A county is eligible to participate in a land pool if the board determines it((:

(b) Has))has existing state forestlands encumbered with timber harvest deferrals, associated with wildlife species listed under the federal endangered species act, more than ((thirty))30 years in length.

(3) All lands in the land pool are state forestlands and must be managed in the same manner and with the same responsibilities as other state forestlands. Proceeds from the state forestland pool must, except as provided in RCW 79.64.110, be distributed under RCW 79.22.010 and 79.22.040.

(4)(a) A county may participate in the land pool only if it is eligible, as determined under subsection (2) of this section, and the board receives a written request to do so by the legislative authority of that county.

(b) The board shall end any further participation of a county in the land pool if it receives a written request to do so by the legislative authority of that county. If the board receives such a request, that county's interest in the land pool as a beneficiary remains, but no new contributions of asset value may be made to the land pool on behalf of the county and no new lands may be purchased in that county for the land pool.

(5)(a) If a land pool is created by the board, the department and the participating counties must develop a funding strategy for acquiring land to include in the land pool.

(b) The department and participating counties may pursue funding for the transfer of state forestland encumbered by long-term wildlife-related harvest deferrals within the participating counties into status as a natural area preserve under chapter 79.70 RCW or a natural resources conservation area under chapter 79.71 RCW, and use the value of the transferred land to acquire working forestlands to include in the land pool.

(c) The department and participating counties may pursue other land acquisition funding strategies.

Sec. 13. RCW 79.19.050 and 2003 c 334 s 529 are each amended to read as follows:

((The legislature may authorize appropriation of funds from the forest development account or the resource management cost account for the purposes of this chapter.)) Income from the sale ((or management)) of property in the land bank shall be ((returned as a recovered expense to the forest development account or the resource management cost account))deposited in the land bank account created in section 14 of this act and may be used to acquire property under RCW 79.19.020.

NEW SECTION.  Sec. 14. A new section is added to chapter 79.19 RCW to read as follows:

The land bank account is created in the state treasury. To this account shall be deposited such funds as the legislature directs or appropriates. Expenditures from this account may be used only to acquire property under RCW 79.19.020. Expenditures from this account may be made only after appropriation.

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